Large national nursing home chains may blame recent financial losses on the new Medicare prospective payment system for skilled-nursing facilities. But some smaller operations are quietly praising it.
Under the PPS, nursing homes are paid a daily rate for each patient, based on the patient's needs. The switch from a system that paid separately for every service was mandated by Congress.
Some administrators welcome predictable Medicare payments. Negotiating per-capita contracts with pharmacies, labs and therapy providers helps keep costs under control and turn a profit.
"Overall, (the PPS) makes the operator more efficient and effective," said Floyd Schlossberg, president and chief executive officer of Chicago-based Alden Management Services. Schlossberg, who said none of his 20 Chicago-area facilities are losing money under the PPS, attributed his success to contract prices he has negotiated with ancillary-service providers.
The PPS is a windfall for Lutheran Social Services of the South, a not-for-profit senior services organization in Austin, Texas. Vice President for Finance Keith Eckelkamp says the five nursing homes have never treated high-acuity patients.
"We're at the end of the scale where the (rates) do cover the cost of providing those services," he said. Lutheran hopes Medicare revenues will reverse the past four years' money-loss trend.
Mark McKettrick, administrator of 144-bed New London Health Center, in Snellville, Ga., said he has survived by renegotiating his vendor contracts and educating his medical director about PPS payment limits. "Right now I'm making over $100 per day per (Medicare) resident," he said. New London does not treat high-intensity-care patients.
Homes that focus on subacute patients are faring less well under the PPS, said Ron Tinsley, a Dallas-based consultant for PricewaterhouseCoopers. "Some are holding fast to their case mix and trying not to have to step up (acuity) any more."
But other subacute facilities are managing to make ends meet. Some 90% of Medicare patients at 140-bed English Oaks Convalescent and Rehabilitation Hospital, in Modesto, Calif., are classified as high-acuity, said owner Terry Mundy. He spent a year negotiating contracts with ancillary-service providers, he said. "Right now I'm making money." Next year may be another story, he said. That's when payment rates for some categories of patients will dip further.